January 8, 2016
Concern is mounting that the booming tech industry that has fueled the Bay Area office market back to dot.com peaks is close to another zenith. A CBRE Group, Inc. report finds that while robust office-leasing activity, soaring rents, and tight vacancies in 2015 portend positive news for the Bay Area, there’s also a potential correction in tech valuations.
The concern is especially pronounced in submarkets such as San Francisco with high density of “unicorn” tenants. Venture-capital database CB Insights says there’s 60 unicorns based in or with a presence in the Bay Area, the largest concentration in the U.S.
Increased vigilance about the growth profile and lasting power of Bay Area markets isn’t surprising, since CBRE says 36% of all office stock (172 msf) is tech occupied (some 5,400 firms), and accounted for 60% of all leasing activity (through three quarters of 2015).
“Although there is caution in the air about frothy tech valuations and the continued availability of venture-capital funding, office real estate in the Bay Area remains a strong asset,” said Colin Yasukochi, CBRE’s director of research and analysis in the Bay Area.